ENVIRON

MANAGING GREENHOUSE GASES IN THE DEVELOPING CARBON MARKETS

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Courtesy of ENVIRON

Introduction

On February 16, 2005, the Kyoto Protocol entered into force following Russia’s ratification after a lengthy period of uncertainty. Although the US and Australia have stated that they will not ratify the Protocol, here, too, there are initiatives by state governments and by the private sector to reducegreenhouse gas (GHG) emissions.
Firms are now faced with important strategic choices concerning their management of GHGs. Not only are firms with a global presence affected, but also those in the U.S. seeking to identify and take advantage of opportunities for the creation and sale of tradable GHG emission allowances. New and potentially profitable opportunities are emerging for firms proactive enough to find and benefit from them. For such firms, effective management of GHG emissions may mean thousands, perhaps millions of dollars, not just in avoided cost, but possibly in additional revenue to the corporate bottom line. Responding effectively is crucial to realizing the benefits of these new opportunities and gaining competitive advantage.
This article provides an overview of the developing markets for the trading of emissions reductions and proposes a proactive approach for the management of GHG emissions that involves a six-step planning process to aid in the evaluation of the strategic importance of GHG issues to a firm and in the development of sufficient information for informed corporate decision making. The planning process includes the following recommended steps: (1) obtain and evaluate basic GHG information; (2) conduct a screening-level GHG audit to determine the importance of GHG issues to the firm; (3) where warranted, develop a corporate GHG emissions inventory; (4) identify GHG emissions reduction measures and their associated costs; (5) determine the value of GHG emissions trading; and finally (6) develop a written corporate strategy for optimal GHG management.

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